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Blockchain: Rewriting the way government does business

Blockchain: Rewriting the way government does business

Pioneers in governments are embracing emerging tools from the private sector to transform how they achieve their goals. KPMG and Forbes explore how blockchain technology can build smart cities in this chapter of ‘The Great Rewrite’.

Also on KPMG.com

As consumers, we live much of our lives digitally. As citizens, that’s not always the case. When we interact with government agencies — in person, by mail, on the phone — we brace ourselves and anticipate aggravation. The conveniences that online retailers have built — websites that remember who we are, what we did before, our preferences — may be uncommon experiences when we try to access government services. Most old-fashioned paper checks that are still written today are payments to and from governments.

“Today as citizens we expect to deal with government the way we deal with every other part of our life,” said Lorna Stark, national advisory industry leader for state and local government at KPMG.

Pioneers in governments are beginning to rewrite the way things get done. And they’re embracing the same tools that have enabled transformations in private sector: more sophisticated web portals, mobile apps to crowdsource public concerns, cloud computing, data analytics and the potentially revolutionary record-keeping method of blockchain technology.

A blockchain in the simplest terms is a shared database, distributed across a network of multiple sites or institutions. It’s made to securely record transactions and ownership of assets. Blockchains could create a universal record of who owns what and allow unified access to it.

“Just think if you could put all of your required information into one government portal, into the blockchain,” Stark said. “Your name, your address, all that pertinent information. And then you don’t have to re-enter it 10 times to get your driver’s license, to get your CPA license, to record your title transaction, to pay your taxes. Imagine that world where you only have to give the government your information one time.”

Ironically, blockchain technology was devised as a way to avoid central governments. The anonymous inventors of the digital cryptocurrency bitcoin created the methodology as a way for the community at large to maintain an agreed-upon, immutable record of who owns how much, without having to entrust record-keeping to a single authority such as a government central bank. All participants in a blockchain network can access identical copies of the ledger, and updates happen almost instantly.

Digital ‘keys’ and signatures cryptographically control who can update and view records. The assets tracked in the shared ledger can be physical or electronic, and they can be ‘smart’ — containing computer code that can self-execute new transactions when set triggers are reached (for example, a bond that disperses its own coupon payments).

The Delaware Blockchain Initiative

The State of Delaware embraced blockchain in 2016 when then-Governor Jack Markell launched the Delaware Blockchain Initiative. The state has unique record-keeping requirements, but its efforts merit attention. “The more we learned about it, the more we thought there’s something here for the state,” said Andrea Tinianow, director of the Delaware Blockchain Initiative.

Delaware’s interest began as a way to bolster the business it does in company incorporations. Thousands of businesses, including about two-thirds of Fortune 500 firms and more than 80 percent of American IPOs, are incorporated in Delaware. A requirement is that companies tell Delaware how many shares they have issued and then track who owns them. Some corporations have expressed interest in using blockchain for that, in part to avoid record-keeping errors. The number of shares a company has issued often doesn’t match the number it has registered with the state, and when a material event such as an acquisition occurs, there can be disputes. Record-keeping using a blockchain — a single ‘golden record’ — could eliminate inaccuracy. Delaware is amending its laws to make it crystal clear that it is legal for a company to issue and track its shares on the blockchain.

At the same time, Delaware is testing blockchain internally to organise the Delaware Public Archives, which contain everything from historic photos to mountains of public records. Older documents are being digitised. Databases and spreadsheets from disparate divisions are being migrated to a new distributed ledger. ‘Smart records’ would automate compliance with state laws that dictate retention and destruction of documents. Ultimately the system will make it easier for agencies statewide to submit documents to the archive and residents to find information.

Records in the blockchain can be any asset, including physical property. California company velox.RE, along with the International Blockchain Real Estate Association, has been working with the government of Cook County, Illinois, to create a legal blockchain version of a property deed. That could someday replace paper deeds and create a universally acknowledged, ‘golden record’ of who owns what property. It would eliminate the need for things like title insurance. For governments that register land transfers, blockchain property records could minimise fraud committed with counterfeit deeds. “With blockchain, you can’t Photoshop a fake deed,” noted Ragnar Lifthrasir, CEO of velox.RE and founder of the association.

Elsewhere in the world, the United Kingdom’s national land registry said it will test a blockchain-based program that “would enable the ownership of property to be changed close to instantaneously.” In Singapore, the central bank has completed a trial of distributed ledger technology for interbank payments, creating a digital representation of the Singapore dollar.

One model for where things may be headed is the little nation of Estonia, which became newly independent in 1991 and built its new government to leverage digital technologies. The Estonia ID card, a digital identity card pegged to a blockchain-like infrastructure, gives citizens access to a broad range of public services, acting as a driver’s license, passport, credit card, transportation pass and more.

The rewrites happening in government services aren’t always in the most obvious places. In Utah, new drivers can practice questions and answers on the state driving exam by talking with an Amazon Echo home assistant, courtesy of a partnership between the state and Kansas-based software developer NIC. Syracuse, New York, has tested a system called SQUID — for Street Quality Identification Device — that uses computer vision to sense and analyse potholes on streets, aiming to apply limited maintenance dollars as effectively as possible. Again, these are examples of applying tech tools made for consumer and industry applications to government services.

Cities far from traditional technology hubs like Silicon Valley or Boston are moving to become ‘smarter’. Columbus, Ohio, in 2016 won $40 million from the US Department of Transportation in the “Smart City Challenge” with a plan built around better use of technology and data to improve its transportation. The Smart Columbus project will bring electric-vehicle charging stations, street lights that act as wireless internet hubs, emergency vehicles that interact with traffic signals and driverless shuttles. Data analysis will improve downtown traffic and parking.

Disadvantaged areas will get help, too. A pilot shuttle bus for the Linden neighbourhood, its route determined by data analytics, is designed to give residents better access to jobs, healthcare, education and healthy groceries. “Mobility is the great equaliser of the 21st century,” said Columbus Mayor Andrew Ginther.

None of these government projects are without challenges. Becoming a smarter city requires multi-agency cooperation and ongoing funds. Migrating legacy data to a distributed ledger system can be costly. Citizens may have privacy concerns as technology becomes more common in the public sector. But governments were early adopters of computer technology, and the potential now exists to use public information in transformative ways.

“In the ’50s, we had the advent of the supercomputer and the ’90s the explosion of the internet,” said KPMG’s Stark. “And now, government could harness the potential of blockchain to leapfrog the public’s perception of efficiency, transparency and trust.”

Author

Leonard Brody is the best-selling author and entrepreneur that created The Great Rewrite concept.

This article was first published on Forbes as part of The Great Rewrite – a series highlighting the profound, worldwide paradigm shift in the way we do business, and consequently, the way we live our lives. KPMG and Forbes collaborated with Leonard Brody, entrepreneur/creator of The Great Rewrite, to explore this technology tipping point and how it is affecting everything from human behaviours to the global economy.

KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.